Revenue from mortgages on cell tower sites across the U.S. will secure $1.8 billion in asset-backed securities from the SBA Tower Trust. The series 2024-1 notes will be the first issuance from this program in two years.
Slated for an October 11 close, SBA Tower is a master trust that will issue 1C, 2C and 1R tranches, with a roster of managers that includes Barclays, Citigroup Global Markets, Goldman Sachs, J.P.Morgan Securities, Mizuho Securities and Morgan Stanley, according to Asset Securitization Report's deal database.
The transaction will repay investors through a senior-subordinate structure, and the 1C and 2C notes have anticipated repayment dates of October 2029 and October 2027, respectively, though both tranches have an October 2054 legal final date, according to Moody's Ratings.
Strong fundamentals like strong contractual cashflows, a favorable outlook for the wireless sector and the underlying mortgage structure all support positive credit to the notes, Moody's said. Cashflows come from lease contracts with the three largest wireless carriers, T-Mobile USA, AT&T Corp., and Verizon Communications, and they account for 92% of the portfolio's annualized run-rate revenue (ARRR), according to Moody's.
On the mortgage structure, Moody's notes that the issued securities will represent beneficial interests in the mortgage loan to borrowers, who themselves receive guarantees from parent companies. A pledge of the equity interests of the borrowers also secures the guarantees.
"This makes it easier for investors to take control of the collateral," Moody's said. The agency added that should a bankruptcy occur investors get priority for collections—from the value of the mortgaged properties—before other creditors.
Yet some risks loom over the deal, including the fact that SBA Network Management will act as the manager of the tower sites for the transaction. If a manager goes bankrupt, then tenant lease administration could be disrupted.
ASR's deal database puts yields at 4.8% on the 1C notes with A and A2 ratings from Fitch Ratings and Moody's, respectively.
Moody's did not rate the 2C notes, it said.
